Federated Hermes: Weekly Markets Wrap Up 17 September 2026
In this week’s markets wrap up we assess the Federal Reserve’s latest interest rate decision and what it signals for bond markets, and the recent AI-driven equity sell-off and why we believe the long-term investment case for AI remains intact.
Karen Manna, Fixed Income Strategist at Federated Hermes
Bond Market Leads the Fed
The Federal Reserve raised interest rates this week, but the bond market got there first. The move confirms policymakers remain concerned about inflation, but the vote will tell us whether the committee shares Chair Warsh’s urgency or whether the hike masks a more divided Federal Reserve.
Treasury yields have already moved sharply higher as investors repriced inflation risk and higher-for-longer rates. In many ways, the bond market has been leading the Fed rather than the other way around.
That makes today’s 25 basis points less important than what comes next. Much of the tightening risk is already priced in but the bigger signal is whether the Fed believes this is enough or the beginning of more to come.
Tej Sthankiya, Senior Investment Analyst for Sustainable Investing at Federated Hermes
AI Fundamentals Remain Intact
This week’s sell off represents another example of how volatile and sensitive the market is to AI related news flow in the short term, which creates opportunities for longer term investors. It is apparent that companies across the AI value chain (whether involved in the data centre build out or developing enterprise/consumer use cases) are seeing positive trends with respect to implementation, adoption and usage.
It is difficult to predict how long the sell off will go on for as the market’s short term risk appetite is heavily influenced by the top-down macro story (e.g. rates, oil, geopolitics), where trends have been less benign in recent weeks.
A significant catalyst that could drive a recovery in share prices is Anthropic’s S-1 filling. Public investors currently do not have visibility on revenue growth and margin dynamics for the largest AI native business in the market. If both metrics are higher than expected (and show accelerating trends), this should give the market greater conviction that there is a large and durable return on investment in AI capex, which in turn, should help investors underwrite continued AI capex growth over a longer time horizon.
